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Influential annual Spot the Dog survey results are in! BestInvest name and shame the latest underperforming dog funds

  • The latest Spot the Dog list from online investing service Bestinvest will reveal 86 underperforming equity funds this weekend
  • This is a slight increase on the 77 paw performers named and shamed in August 2021’s report – but with some big beasts in the list, assets held in the doghouse are up by 54%
  • Based on their current size and ongoing fees, the latest dog list would generate annual fees for £463 million in a flat market
  • Many of the 12 lumbering canines managing over £1billion in assets are in the Global and Global Equity Income sectors, with equity income funds widely barking up the wrong tree
  • JP Morgan’s US Equity Income controls a vast £3.92 billion of investors’ money and underperformed its North America index by -32%
  • St James’s Place, abrdn and Jupiter are well represented with six funds apiece in the Dog list. But while Jupiter’s six funds only total £988.6 million in assets, abrdn’s comprise £1.84 billion and St James’s Place a hefty £5.74 billion
  • The strength of global equity markets in recent years means it can be tougher for investors to identify weak funds, with even poorly managed vehicles generating gains
  • The full document will be available from 11pm on Friday at the link below, and in order to give readers free access to this extensive report, it would be great if online coverage could link back to it:
    https://www.bestinvest.co.uk/research/spot-the-dog

Investors need to make sure that each part of their portfolio is pulling its weight. And online investing service Bestinvest provides an essential resource to help savers review their investments and see if they are being hounded by terrible returns. This weekend sees the release of the latest Spot the Dog report that names and shames poorly performing equity funds – the guide fund managers would love to ban.

The much-anticipated bi-annual list will reveal 86 funds that have consistently and significantly underperformed in recent years [1] – together with the sectors and regions most plagued by laggards.

It is a reminder that with less than two months to go before the end of the tax year, it’s essential that Individual Savings Account (ISA) and Self-Invested Personal Pensions (SIPP) investors shine a bright and sometimes cruel light into the corners of their accounts. This is not to say that savers need necessarily to switch out of a Dog fund: they might well have good reasons to forgive a fund’s recent travails and to believe things will rapidly improve – but owning a Dog fund is certainly a reason to reconsider whether to hang on or move elsewhere.

Based on their current size and ongoing fees, the latest Dog list would generate whopping fees of £463 million in a flat stock market, providing lucrative rewards for investment firms.

While the number of funds in this Spot the Dog list is only nine higher than the previous count in August, our spotlight reveals a 54% surge in assets held in dogs from £29.6 billion to £45.4 billion. 

Where are the dog funds?

Nearly £18.5 billion of that is to be found in the Global and Global Equity Income sectors, which accounted for 39 of the 86 dog funds. Jason Hollands, Managing Director of Bestinvest, says this is partly because the US has come to dominate the indices by which many funds are measured.

‘The MSCI World, for example, has around two-thirds of its market capitalisation in the US,’ he says. ‘Also, the technology sector has become increasingly important, particularly the mega cap technology names such as Meta (formerly Facebook), Apple, Microsoft and Amazon.’

‘This has presented a dilemma for active managers: either hold significant amounts in the US and technology stocks with the resulting lack of diversification and income, or risk weakness versus the benchmark,’ he adds.

There are 25 Global dogs from a total universe of 177 such funds widely available to UK investors. Things are as rough over in the Global Equity Income doghouse, where 14 of the world’s 37 funds in that sector linger.

‘The US is a low-yielding market (current yield is 1.27%) and has been led in recent years by growth stocks, many of which have never paid a dividend,’ says Hollands. ‘As such, it’s been near impossible for Global Income funds to beat the main global indices – they tend to be underweight both the US and growth stocks in particular.’

It is noteworthy that there was just one emerging market Dog fund in the latest report (from St James’s Place) and only one UK smaller companies sector Dog (the tiny MI Sterling Select Companies). There were no North America, European or Japanese smaller companies vehicles qualifying as dog funds.

‘This suggests active fund managers do a better job in less researched parts of the market,’ says Hollands. 

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